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Why Perkins Loans Borrowers Should Think Twice Before Consolidating

By WTOP Staff

When it comes time to repay student loans, every borrower should have a strategy.

For many people, that strategy might include student loan consolidation. Consolidation has its pros and cons , but if you’re dealing with multiple payments from multiple loan holders, this option could definitely simplify things for you. But borrowers with Perkins loans need to think twice before consolidating these loans. Here’s why.

[Beware of four warning signs of student loan default.]

— Perkins loans have their own forgiveness program. Perkins loans are federal student loans for students with significant financial need. These loans come with a fixed 5 percent interest rate and special postponement options, but the greatest benefit of these loans is their exclusive forgiveness program.

Unlike some income-driven repayment plans that may eventually result in forgiveness after years of payments, Perkins loans are forgiven incrementally. This means you shave a bit off this debt each year you are eligible. How much depends on the type of work you do, as well as when you took out your loan. However, in all, it’s possible to have up to 100 percent of your Perkins loan debt cancelled.

Fields that qualify for this forgiveness include: teachers, nurses, child or family services workers, active duty military, firefighters and police and a number of other public and volunteer services. With Perkins loans, you can only cancel amounts you have yet to repay and there is no retroactive forgiveness. Schools administer Perkins loans themselves, so if you think you qualify for this option, you should contact them as soon as possible to find out more.

[Here are terms you should know before repaying student loans.]

— Consolidation wipes away Perkins loan benefits. To understand why you shouldn’t consolidate Perkins loans, you first need to understand how consolidation loans work. Some may think consolidation simply combines your loans together. That’s somewhat true, but it doesn’t tell the whole story.

When you consolidate your student loans, you borrow a new loan to pay off your original ones. So, in most cases, your original loans no longer exist after you consolidate them — and that’s where the issues come with Perkins loans.

By consolidating these loans, you erase them, meaning you also erase your ability to utilize their special postponements or have them forgiven through Perkins loan forgiveness. In short, you keep the debt but lose the benefits that came with it.

[Understand the pieces of your student loan payment.]

— You have options. Of course, just because you have Perkins loans doesn’t mean consolidation can’t still be part of your repayment strategy. If you have these loans and want to consolidate your debts, be sure to do two things before moving forward.

First, think about the work you’re doing now and plan to do in the future. Consider if you expect to have a job in one of the fields that offers complete forgiveness. If not, then you may not miss the benefits above.

Even so, your best bet may still be to move on to the second item on your checklist, which is to pay attention to the loans you consolidate.

When taking out a consolidation loan, you choose which debts to include — a federal consolidation doesn’t have to include all of your federal student loans. Instead, when you go through this process, keep your Perkins loans separate. You’ll have a separate payment to make, but the potential freedoms this debt provides could be worth the hassle.

If you’re not sure if you have Perkins loans, Definitely find out before you consolidate by visiting the National Student Loan Data System.

More from U.S. News

Perkins Loans FAQs

4 Reasons to Consolidate Your Student Loans

Make a College Cost Plan to Limit Student Loans

Why Perkins Loans Borrowers Should Think Twice Before Consolidating originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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